Taxes are an inevitable part of life, and they’re equally unavoidable when buying and selling a home. While they might not be enjoyable, having to deal with property taxes and other real estate taxes can be much less stressful if you understand what you’re getting into.
Taking time to understand real estate taxes can help you save time and money, avoid potential problems, and make sure there are no surprises when you go to sign on the dotted line.
If you’re buying or selling a home in Alaska, this resource should be helpful to you. You’ll learn what types of taxes you’ll have to pay, how much the transfer taxes are, who pays them, how to calculate your property taxes, and the various tax breaks you might enjoy.
Will You Have to Pay Taxes When You Sell Your Home in Alaska?
The primary source of funding for most local governments in Alaska is the local property tax. In 2014 alone, over $1.66 billion in revenue was created by local governments, most of which was from property sales and related taxes. $1.34 billion of the $1.66 billion came from property taxes alone.
For this reason, you’ll likely always have to pay property taxes, since they fund the local governments. However, capital gains taxes — the taxes you pay on the profit you make from selling a home — are less certain. In most cases, if you profited under $25,000 you won’t have to pay taxes on the sale of your home.
That being said, tax laws can change from location to location within a state, even down to the county level. For this reason, it’s important to always consult with a tax professional and your local real estate agent. Local agents have seen the trends that other home buyers and sellers in your area have experienced and can provide you with expert advice.
How Much Are Real Estate Transfer Taxes in Alaska (and Who Pays Them)?
Alaskans are in luck when it comes to one major tax: transfer taxes. There are no transfer taxes in Alaska, which can save you a lot of money.
However, the transaction may still be subject to taxes and tariffs at the local level which can change depending on locality and circumstance. This, again, is where your real estate agent can act as an expert guide.
Many local taxes are subject to circumstances such as how long you’ve owned your home, whether you’re a buyer or seller, and other variable characteristics. It’s critical to work with your agent to make sure you understand the tax situation in your area thoroughly so there are no surprises at the time of the transaction.
How to Calculate Property Taxes
Unlike every other state in the nation, Alaska doesn’t charge a property tax in most of the state. It’s true that property taxes are the primary source of revenue for most of the major municipalities, but those large cities and jurisdictions are relatively few and far between.
Most of Alaska is made up of significantly smaller regions that, since they lack tax base sufficient enough to support a property tax, favor a sales tax instead. Furthermore, many of the municipalities and regional areas in Alaska are unincorporated, meaning they don’t even have the legal authority required to levy a tax.
Areas with a Property Tax
For the areas in Alaska that do charge a property tax, it’s required that the tax is assessed in accordance with Alaska law. This law states that all property is taxable unless the law exempts it. If a property is owned by local, state, or federal governments, that property is exempt from taxes. The only exception is if some kind of private lease or contract is associated with the property.
Other types of property that are excluded from property tax includes property owned by disabled veterans or senior citizens.
However, most people in Alaska will be paying a sales tax as opposed to a technical property tax.
Additional requirements in Alaska law mean that all property has to be valued at fair market value each year as of the first day of the year, so reinspection happens on a more or less continuous basis. However, one inspection cycle (meaning one reinspection of all the properties in Alaska) can’t take more than six years.
For this reason, most properties in Alaska are reassessed every few years.
Calculations and Examples
In Alaska, if you do have to pay property taxes, the way you calculate those taxes can vary greatly depending on where you live. The median listing price in Alaska, generally speaking, is $282,000, so we’ll use that figure to create a couple of examples.
Statewide, the average property tax rate is 1.209%, meaning if a home sold at the median list price, around $3,409 in property taxes would be due. In Anchorage, that percentage is 1.355%, which would increase the total to $3,821. Meanwhile, in Juneau, the rate is only 0.907%, which would only equate to $2,558 in annual property taxes.
Given the wide variability in property taxes for those who do have to pay them, and given the nuance inherent in using a sales tax in other locations, it’s critical to discuss your tax situation with your real estate agent. Only they will be able to provide in-depth, market-specific information to help you prepare for the transaction and avoid being surprised by higher-than-expected taxes.
Tax Breaks for Alaska Home Buyers and Sellers
Home buyers and sellers in Alaska can benefit from many of the general deductions allowed at the federal level. For instance, if you have moving expenses or renovation expenses required to get your home ready for sale, you can usually take those off your taxes.
For buyers, there are many first-time home buyer deductions, and you can also deduct your moving expenses and similar costs.
However, there are also state-level benefits that you can benefit from on both the selling and the buying end of the process.
Tax Breaks and Credits for Buyers
For home buyers in Alaska, there are several programs that might be able to help you save money. Most only apply to certain populations, but for those who qualify they can be a welcomed break come tax time.
Senior Citizen Exemption
For senior citizens in Alaska, up to $150,000 of the assessed value of your property might be exempt. There are a few qualifications for this exemption. First, you have to have owned and occupied your property as your primary residence and you must be at least 65 years old.
Furthermore, if you’re at least 50 and you’re a widow or widower of a person who qualifies as a senior, you can typically take advantage of this exemption, as well.
Disabled Veteran Exemption
If you qualify as a Disabled Veteran, you can also exclude up to $150,000 of the assessed value of your home come tax time. As with most of the other state-level exemptions, you have to have owned and occupied your home as your primary residence in order to qualify. However, you can also qualify if you’re at least 60 years old and you’re the spouse of someone who would have qualified as a Disabled Veteran but who has passed on.
While the other exemptions only apply to certain populations, this exemption is more open and applies to more people. If you are the owner of your home and you occupy it as your primary residence, you might be able to deduct 20% of the assessed value of your home up to $50,000.
Military Service Widow / Widower Exemption
For Alaska residents who are widows or widowers of someone who served in the military, who lived in their residence as the primary place of residence, and have not remarried in the last year, this exemption may apply.
If you remarry, you will no longer be eligible for this exemption as of the January 1st following your subsequent marriage.
Being the victim of a large-scale disaster is a terrifying and stressful experience. However, come tax time you may be able to catch a break.
For those who owned and occupied a residential property that was at least 50% destroyed by a fire, there are several possible Disaster Exemptions available. You have to make your applications within 120 days of the fire.
Be sure to consult with a local tax professional for more information on the specifics and qualifications.
There may also be other tax relief opportunities available for buyers in Alaska. Be sure to ask your real estate agent for more information to see if you qualify for additional incentives and cuts.
Tax Breaks and Write-Offs for Sellers
While there aren’t as many specific programs available for home sellers in Alaska, you can still enjoy multiple deductions and tax breaks associated with the costs of selling your home.
For instance, any administrative or advertising costs you incurred throughout the home selling process can be written off in most cases. Additionally, escrow fees, legal fees, and inspection fees can also be included in your deductions as can the costs associated with your title insurance.
Tax exposure, and tax breaks, can vary greatly from region to region. When selling your home, it’s important to contact an experienced, local real estate agent. Only an agent with local experience can help guide you through the process, and many will even work with you on a flat fee basis to help further minimize your costs.
Home buyers should also consult with an agent so you can have an advocate at your side through each critical stage of the process, including gaining information about tax exposures and breaks. You can also find out about home buyer rebates that may be available in your state.
You’ll also want to consult with a certified tax professional or accountant in order to minimize your exposure and maximize your savings.